Silo 1 · Global Late Payment Law
The EU Late Payment Directive
By Santanu Sarma — Mathematical Economics & Public Finance · Updated June 2026
Directive 2011/7/EU is unusual among the statutes in this series because the rate is not a fixed number written into the law — it floats with the European Central Bank's policy rate and resets every six months. If you are invoicing across the eurozone, the number you plug into your interest formula changes on 1 January and 1 July whether or not you notice.
The Reference Rate Mechanism
Article 2(6) of the Directive defines "statutory interest for late payment" as simple interest equal to a reference rate plus a margin. For euro-area Member States, the reference rate is:
the interest rate applied by the European Central Bank to its most recent main refinancing operations
— the ECB's MRO rate, not the deposit facility rate that gets most of the headline coverage. The margin is set at Article 3(2): at least 8 percentage points above that reference rate. Member States outside the euro use the equivalent rate set by their own national central bank instead.
Statutory Minimum: Reference Rate + 8 Points
The rate is fixed for six-month blocks: the MRO rate in force on 1 January governs interest accruing from January through June; the rate in force on 1 July governs July through December (Art 2(6)).
| Period | ECB MRO Rate (Reference Date) | Statutory Minimum (Reference + 8pp) |
|---|---|---|
| 1 Jan – 30 Jun 2026 | 2.15% (as at 1 Jan 2026) | 10.15% per annum |
| 1 Jul – 31 Dec 2026 | 2.40% (as at 1 Jul 2026, post the ECB's 17 June hike) | 10.40% per annum |
This is a statutory floor, not a ceiling — Article 7 permits Member States to legislate a more creditor-friendly margin, and several have. Germany sets the B2B margin at 9 points over its own Basiszinssatz (BGB § 288(2)); France sets it at the ECB rate plus 10 points by default unless the contract specifies otherwise (Commercial Code Art. L441-10). Always check the implementing statute of the debtor's Member State rather than assuming the Directive's 8-point floor applies uniformly.
Payment Term Defaults
- Silent contract (no date specified): interest is due 30 days after the invoice is received, or 30 days after goods/services are provided if the invoice date is unclear (Art 3(3)(b)).
- B2B with an agreed date: parties may freely agree up to 60 calendar days. Terms beyond 60 days are permitted only if not "grossly unfair" to the creditor (Art 3(5)).
- B2G (public authority as debtor): capped at 30 days, extendable to 60 days only for specific public bodies performing economic activities of an industrial character (Art 4(3)–(4)).
The €40 Minimum Compensation
Article 6 entitles the creditor to a fixed €40 (or national-currency equivalent) the moment statutory interest becomes due — automatically, without needing to prove any actual recovery cost. It stacks on top of the interest calculation, not instead of it, and the creditor can claim further reasonable recovery costs (legal fees, collection agency charges) above the €40 if those costs are documented and exceed it.
Grossly Unfair Terms Are Void
Article 7 renders unenforceable any contractual term or practice that is grossly unfair to the creditor — explicitly naming clauses that exclude the right to interest, or that exclude compensation for recovery costs, as presumed grossly unfair. A supplier cannot be talked into waiving the Directive's protections through standard terms imposed by a larger buyer.
The Formula
Interest = Principal × Daily Rate × Days Overdue
Total Owed = Interest + €40 (or more, if documented)
Worked example: A €10,000 invoice, 30 days overdue, under the H1 2026 statutory minimum of 10.15%.
Interest = €10,000 × 0.000278 × 30 = €83.42
+ €40 fixed compensation = €123.42 total
What Changes if the Recast Regulation Passes
The Commission's 2023 proposal (COM(2023) 533) would convert the Directive into a directly applicable Regulation — no national transposition, identical rules in every Member State, a tightened 30-day default for B2B, and a proposed increase of the fixed compensation to €50. As of mid-2026 this remains a proposal under negotiation between Parliament and Council; the 2011 Directive, with the national variations above, is still the governing law.
This article is informational and reflects published EU and national statutory mechanics as of June 2026. It is not legal advice. The reference rate resets every six months and national implementing margins vary — confirm the current published figure for the relevant Member State via the European Commission's late payment portal or the national central bank before relying on a specific number.